FIRSTGROUP, the rail, bus and airport operator, plans a dramatic expansion of its network of "guided" bus routes after the runaway success of the concept in increasing passenger numbers.

The company intends to more than triple the number of guided bus schemes in operation to 110 in the next two years, and forecasts that by 2001 almost one- fifth of its bus revenues - pounds 140m a year - will come from this new approach to public transport .

The guided busways cost pounds 1m a kilometre to build. They are usually sited in the central reservation of major roads, to bypass traffic queues. Buses are adapted, using special guidewheels at the front. Once in the guideway they steer automatically and activate traffic lights to turn green as they approach junctions.

The use of guided buses in Leeds and Ipswich has produced passenger growth of 50 to 60 per cent in three years. FirstGroup is forecasting a further 35 per cent rise in the next three.

FirstGroup is investing another pounds 78m in new buses this year, and has indicated that it will step up investment in its three rail companies if the Government agrees to extend franchises. It is already investing a total of pounds 210m on new trains for the three franchises - Great Western, Great Eastern and North Western.

Analysts expect the company to press for five to seven-year extensions to the franchises, which expire between 2004 and 2006.

Profits last year rose by 36 per cent to pounds 111m on turnover up 85 per cent to pounds 1.47bn following the takeover of the Great Western and North Western franchises.